Report: E-Mail Marketing To Reach $7.3B by 2005

As businesses worldwide continue to count the damages caused by the costliest e-mail-transmitted computer virus in history, Jupiter Communications released a report on Monday predicting that worldwide direct e-mail marketing will balloon from $164 million (US$) in 1999 to $7.3 billion in 2005.

Jupiter (Nasdaq: JPTR) also predicts that the amount of commercial e-mail being sent to U.S. consumers will grow by 40 times, creating a host of strategic, technical and security issues for corporations hoping to use the low-cost channel to obtain and retain customers.

For e-commerce companies, e-mail marketing offers fast responses along with a high rate of return due to the low cost of the medium. “Businesses are beginning to perceive e-mail marketing as the silver bullet for acquisition and retention strategies,” said Michele Slack, a senior analyst at Jupiter.

Customers Bombarded

However, as the volume of e-mail rises, the customer response rates enjoyed today are likely to fall, Slack added. Jupiter said the average U.S. online consumer now receives about 40 commercial e-mails per year — a number that will grow to 1,600 by 2005.

“Businesses must focus on delivering value from the first e-mail contact, because opt-out is just a click away,” she said.

Security Issues

The Jupiter report highlights the importance of Internet security in all forms, including e-mail. During the past week, attention focused on the security of e-mail after the Love Bug virus ravaged computers around the world, costing corporations and governments as much as $1 billion. That virus and a handful of copycats already circulating have security experts scrambling to update and refine e-mail filters and virus software.

Still, businesses appear undaunted by the security issues involved with e-mail, with many already shifting considerable resources from their traditional direct mail marketing budgets to the new medium.

High Response Rate

According to Forrester Research, companies have been impressed by the high rate of response obtained when sending e-mails to past online customers. In a recent report, Forrester said that 10 percent of e-mail recipients click through to the sender’s Web page, and about 2.5 percent of those customers make a purchase during the visit.

Forrester estimates that by 2004, marketers will send more than 200 billion e-mails in the United States alone and that the volume of e-mail will surpass the amount of marketing material sent by traditional mail in 2002.

A Dialogue

However, not all e-mails are equally effective. Forrester analyst Jim Nail said it is important for e-commerce players to use e-mail to open a dialogue with customers, starting slowly and gradually building a rapport that will allow more personal information to be gained, which in turn can help fine tune the marketing and sales message.

“To avert a response rate crash, marketers must learn to create dialogue, add value and deepen intimacy with customers,” Nail said.

The best way to gain that sort of relationship, said Jupiter’s Slack, is for companies to create consistent messages, carrying the same tone and style in print, TV and e-mail advertising. Already, she added, about 65 percent of companies are spending up to 5 percent of their marketing budgets on e-mail, with 22 percent spending more than 5 percent.

When Spam Attacks

The growth in enthusiasm for e-mail marketing lends urgency to the spam-control discussions underway in most states and on the federal level. In a March ruling, a Washington state court ruled that the state’s tough anti-spamming law violates the interstate commerce clause of the U.S. Constitution.

The Washington law, one of the toughest in the United States, bans commercial e-mail with misleading information in the subject line, an invalid address, or a disguised transmission path. Fines for violating the law range from $100 to $1,000 per e-mail.

The court ruled that the law is “unduly restrictive and burdensome” because it would require the sender to determine the state where each e-mail recipient resides.

Although many legal and Internet experts are convinced that the ruling is flawed, it brings to the forefront the question about which entity should pass anti-spam laws — individual states or the federal government. A federal law, for example, would resolve the issue of whether a state law unduly restricts interstate commerce.

While undoubtedly encouraging to spammers, the ruling has not opened the floodgates to a new round of spamming. ISPs nationwide still make it illegal for their customers to send spam. Indeed, an elaborate war against spam takes place daily on the Internet as ISPs try to filter out the addresses of known spammers, who, in turn, create a succession of new addresses.